Questions and Answers Regarding the Auditorís Presentation
of the Audit Report at the January 21, 2014 Council Meeting.

1.       Rod Mann had a question about the cityís net fund position declining by $2.4 million on page three. The decline is shown on page 17 of the report where depreciation expense of $3.6 million makes up the †largest portion of the decrease.

2.       Brian was wondering about the Capital Grants and Contributions section on page 13 and questioned if all those grants came in during the fiscal year 2012-2013. The answer is that most of the $1.75 million shown in that section are impact fees that were collected during the fiscal year. Impact fees come under the Grants and Contributions section of the financial report. I know it seems a little strange to call them grants but that is where the impact fees are shown.

3.       Brian stated that the balance in the Capital Projects Roads fund shows a negative† balance† ($130,000) and asked if the city is allowed to have a negative balance. Gary spoke to our auditors about this and to a finance director in another city in Utah. The audit guidelines do not provide for making a comment on this situation, but it is a State Auditor issue. We may get a letter of non-compliance about the negative balance. We can wait and see if the letter requires some corrective action to be taken.

4.       Brian made a comment that it is important for the Council to understand the replacement costs for capital and equipment items. When the fiscal year 2014-2015 budget is complete, I would suggest we at a minimum start looking at a capital expenditures/replacement cost plan for budget years 2015-2016, 2016-2017 and 2017-2018. This would be a best practice in public finance the other cities do and would be good for us to shoot for.

5.       Rod had a question on the Unearned Revenue on Page 12. Those are exaction fees from the Town Center that the city hopes to collect in the future. Those fees are offset on the same page by the Exaction Fee Receivables, so the net effect is zero. There has been no actual cash received. There is a Memo 40-112 dated June 30, 2013 that explains this.

6.       Brian asked about the sales and franchise energy and telephone taxes. The energy tax is 6% and the telecom tax is 3.5%. We receive the telecom tax proceeds from the state every month into our Public Treasurers Investment Fund. The same thing happens with our sales tax.† Sales tax revenue is always 2 months behind. So for example, we will receive money from the state in January 2014 for sales tax revenue in November 2013. The energy tax is received from Questar and Rocky Mountain directly every month. We also receive tax money from Comcast every quarter.

7.       Brian asked how long it would take to get money from the Public Treasurers Fund in to our checking account. It takes one or two days depending on when we initiate the funds transfer.

If there are other questions on the financials provided by the auditors, let me know and I will find the answers.

Gary LeCheminant
Finance Director
Highland City